Good morning, all, and thank you for joining us for the Ithaca Energy First Half Results 2024 Webcast. My name is Carly, and I'll be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. To remove yourself from that line of questioning, hit star followed by two. I will now hand over to your host, Yaniv Friedman, Executive Chairman, to begin. Please go ahead.
Thank you, Carly. Good afternoon, everyone. Thank you for joining our first half earnings call and presentation. I'm Yaniv Friedman, as most of you know, newly appointed Executive Chairman of Ithaca. So it's my first call, and I'm very happy to be here and very happy and excited to join Ithaca, and it's this really pivotal moment for for Ithaca. We'll run through the presentation, and it's split between Iain and myself, and we'll be happy to take any questions at the end. So, if you're could all move to slide three, we'll run through first half 2024 highlights. We are continuing executing our 2024 strategic objectives with our buy, build, and boost strategy. The main point of it is obviously the transformational business combination with the Eni U.K. assets.
Iain will talk more through this, but we are progressing towards completion. We're mostly facing some technical pieces for closing, and we expect these to be completed by early October. Mostly technical, including the Delek sell down that will happen in accordance with the deal completion timeline. Captain Enhanced Oil Recovery phase II project completed with a milestone of first subsea polymer injection in May 2024. Rosebank progressing materially to plan with completion of all the major subsea campaign through the summer window. Completed as well, workover on our operated Erskine field and reinstating the fifth production well at that field. Production lower than we projected for the first half, mostly reflecting non-operated portfolio on short-term production issues that are now mostly resolved.
Still robust EBITDA of, you know, $533 million, net cash flows of $560 million from operating activities. We have a strong balance sheet, a net debt of just over $500 million and significant available liquidity of circa $1 billion. As I'm sure you've seen, we've declared an interim dividend of $100 million, with the ambition to go up to $500 million dollar dividend for 2024 and 2025, and I think that reflects the high cash generative nature of the business combination. And if you move to slide seven, and all of this obviously is something that we've talked about before, but creates... You know, this business combination creates a platform for value-driven growth.
We have a very diversified portfolio in the North Sea with significant scale, and our overall group's capabilities are are significantly enhanced through the Eni partnership. Supports the attractive and sustainable shareholder returns and distributions. We're demonstrating that today as well. Very strong balance sheet, not less important, supports our responsible operations with ESG and decarbonization. We have a strong leadership team in place, with a new CEO that will join the leadership team, but also new leaders that have joined the team, and I I really truly believe that we we have a first-class team in place. And last but not least, two major shareholders, both with Eni and the Delek Group, that are committed long-term shareholders and committed to see Ithaca's growth.
On slide eight, very briefly, you know, this has been talked a lot about, but we're seeing this transformational combination, essentially doubling production over the course of the next few years, with 100 to 110 thousand barrels per day of production. That puts us really at a material scale, and in slide nine, really creates a strategic platform for additional value-driven growth. So Ithaca has been, you know, growing through acquisitions. We also have two assets that are currently not developed, or one is under development, which is Rosebank. We also have Cambo, so we have our organic growth prospects.
We're looking at potentially U.K. additional consolidation and accretive assets that could add to our portfolio, and we're also seriously looking at international M&A, as we believe that we have a really credible platform with the enhanced capabilities that we have to go and execute on that strategy as well. Iain, to you.
Yeah. Thank you, Yaniv, and good day, everyone. So, yeah, slide 10, please. And this is just showing a little bit of an outline of the asset base that we're bringing together with the combination. So we're able to publish later today. We expect a prospectus RNS in relation to the deal, and together, an appendix to that will be a revised-
... Competent Persons Report, which has been run as at June 13th, 2024. It's an independent view of the assets, both the current Ithaca assets and the assets coming in with the Eni combination. And while this shows an independent view of the business going forward with organic potential to be over 100,000 barrels a day for 10 years, it shows combined pre-tax cash from operations of over $10 billion in the next five years, 2025 to 2029. Significant resource base, largest resource base in the U.K. by a number of measures, at 62 million barrels, and 16-year production to resource ratio.
So, this this is an excellent combination in terms of the asset base, but you can see in the bottom right there, that that the diversification this brings us is major stakes in large, long-term assets in the U.K., with a diversified portfolio. So moving on to slide 11, and a bit of a reserves and resources picture on the left-hand side. And again, this is showing you the the overview of the 2P reserves in the blue, and then the 2C potential in the green. And you can see the shape of business that we've that we've built as we bring these assets together.
Very complementary portfolio, a split of resources operated, non-operated, with short cycle value opportunities, like Fotla, and and infill drilling in the likes of Jade and Elgin- Franklin and Mariner. And then larger, longer term portfolio, assets like greenfield assets, of course, Rosebank under construction, and Cambo, moving forward towards a farm down position. So, very complementary, very large scale with lots of optionality in the U.K., and that's what we've been doing in the business, is building strength and building optionality in the portfolio, which is really coming to a climax with this transaction. The next slide, slide 12, please, just summarizes a bit of the value that the partnership with Eni brings.
This is part of a strategic development of Eni's business, where satellite businesses are spun out, where the strength and the capabilities of Eni are able to be deployed into other businesses, where Eni have a large stake in. And and this has been very successfully done with the likes of Vår Energi in Norway, and in Africa with Azule. And this is the next phase of that journey. You can see something of the financial capability that comes with the deal in terms of the balance sheet and the capability of technical expertise that we'll have access to.
And and all of this enhances Ithaca as a business, going forward, and we've referred to this repeatedly as a platform for value accretive growth, either in the U.K., where clearly is our home, where we have lots of capability and deep synergy opportunities, but also the potential for overseas as well. So it's a value-enhancing integration on all levels. Slide 13 maybe brings this to life a little bit in terms of numbers. So the five-year average production outlook from the new CPR, you can see a 34% increase in the overall position. You can see that this is largely a 2 P addition.
This is the, you know, injection of high-quality cash flow assets that don't require very significant investment to deliver those barrels. In terms of the OpEx base, you can see that it's a stabilized OpEx base position. So our previous, you know, cadence on that and trajectory was an increasing and then decreasing OpEx for barrel. What this does is gives us a very flat OpEx for barrel profile in the kind of $23 range over the next five years. And you can see the pre-tax cash from operations addition, which is in the north of $3 billion range over the next five years on the right-hand side, with a 30% increase in the base position.
So again, just a bit of a graphical representation of the strength of the combined businesses, as we as we move forward to close out the transaction. So the business changes, but slide fourteen moves us to something that hasn't changed, the capital allocation framework. Since IPO, this has been our guiding principles around capital allocation. We know that our investors value it and appreciate it. It brings together a commitment to sustaining the business through investing in CapEx that keeps us above the 100,000 barrel a day aim, but also commits us to protect the business with a 1.5x net debt, EBITDA target ceiling around that, which we're a long way from today.
Commitment to return to shareholders, which we are able to reiterate again today with the announcement of the first interim dividend for 2024 of $100 million. But that commitment to 15%-30% post-tax cash from operations, with a specific commitment in 2024 and 2025 for 30%, is the basis of the $100 million initial interim dividend today. But then the cash flow beyond, and this is where the optionality sits, we have options to grow CapEx through the U.K. and beyond, in terms of deploying organic CapEx developments in the U.K.. We've built the optionality to do that, and it's within our framework. We have the potential to be the largest producer in the U.K. by 2030....
And and that will come out of the evolved category of cash flow allocation. We also have the option to extend through M&A. We continue to be active in the M&A market, but we are able to be specific and targeted and strategic about that, given our strength and breadth of capability, including our operational capability. There's nothing which is off the table in terms of our M&A because of the breadth of capability that we have, particularly partnering with Eni in the new business. So, continue to be active there, but we'll do value-driven deals. And then, the ability to yield additional distribution, and that's part of our plan for 2024 and 2025.
We've referenced an ambition to get the dividend up from 30% post-tax cash MOPS up to 500 million for these next two years, and that's what we're seeking to do. And our history is about targeting and executing on those targets around dividend distribution. So that's the capital allocation framework that continues to guide our business. Slide 15. Just a few high-level bullets here around what the balance sheet strength and financial strength looks like post-deal. You know, the scale of assets and the diversification of assets gives us access to lower sources of capital. We're coming up towards a timeframe, which we always said we would look to refinance, and over the next period, that's an option for us.
But we have significant cash flow generation capacity, so we have lots of optionality, and the asset base post-completion supports that. We have a material combined tax loss position of getting up to $6 billion, and that clearly helps from a cash flow perspective and fiscal synergy perspective. So valuable, a accretive position there. Our leverage position at the end of 2023 on a pro forma basis of the combined business is down to 0.23 x. So significant leverage capacity in the business to support growth. And we expect to move forward in the credit rating path towards B B - in the next in the next round of up ratings.
And that's been supported by Fitch and Moody's in the market. That's the expectation of a change. But we're working through that at the moment, and we'll do that post-deal with the agencies. So all builds capacity. We have strong cash flow, and we have strong capacity and optionality going forward, which is the key value driver of the new business. Slide 16. Again, this combination brings together assets that are very synergistic from a ESG perspective and the environmental impact. We have made it clear we're an oil and gas operator. We do so responsibly, and we do so with a view to minimizing our impact. That's seen in the portfolio here.
In the short term, we're bringing in very low-intensity assets, the likes of Signal and of Cygnus and Seagull, and then in the medium term, we're clearly moving towards asset developments like Rosebank, which has much lower ESG and emissions intensity than than the basin in the U.K. And of course, new assets, more efficient, with the potential of electrification, brings brings our portfolio position into a better place. We're already in a good place, and this brings us forward into an even better place. So moving on to Slide 17. Again, what the partnership with Eni has done is enabled us to put together a new leadership team. So the current speakers today, obviously, Yaniv and myself, continue as exec directors.
Luciano Vasques will join as Chief Executive closing in the closing of the deal in early Q4, as has been mentioned. But we've also announced the leadership team that will be in place from closing, and the contribution here of some personnel and expertise from Eni, again, just bolsters the team and the overall capacity as we as we move forward. Slide 18 just references what Yaniv brought out earlier, that we have two long-term supportive shareholders. This is a long-term business, where long-term value will be driven. And Eni and Delek are critical to that. They both have portfolios and investments that have shown significant value growth over the past.
We have a slide in the back here referencing and showing Eni's recent successes, particularly relative to other majors. I'm really excited about how this works going forward and the optionality here around the future of business. So having the access to the skills, capacity, and direction of these two major shareholders is a real positive, we think, for investors. Slide 19 is a summary of the timeline to completion, so no real major change here from previously. We did delay the prospectus issuance so that we could get that June 13th competent person's report updated. We felt that was the right thing to do in terms of having up-to-date, third-party view of our business into the into the material and the prospectus.
So that's meant that we're announcing that today with the results for 1H. And that means that our timeline, as Yaniv said, there's not a lot standing in the way now of completion in reality, so early Q4 is targeted, and we've no reason to expect anything else but delivery on that. Okay, a bit of operational review for 1H, and I think all of this needs to be looked at in the context of the significant value associated with the closeout of the deal and the go-forward position. 1H has been a little bit frustrating from a production perspective. Number of non-operated assets, particularly, where we've had unplanned shutdowns and issues which are now essentially all resolved.
Actually, we've had Pierce, which was offline for the entirety of Q1 when we expected it to be on. It's now actually running at the highest production efficiency I think it's ever run at, and has been an excellent producer the last couple of months, and we expect that to continue. Schiehallion's had some issues around riser management, as I think has been understood. But that, again, is now back at essentially full capacity. And the Lomond facility, which Erskine flows through, has been down for a large part of 1H. Again, now up and running.
The new well that we completed on Erskine, a recompletion, a workover on a well that was scaled, was successfully completed with the Valaris 123 rig during 1H and is online as of two days ago and performing well. So that's turned around. J-13, again, the J-13 well, Harbour operated, that ceased production due to scaling at the very end and early into this year, and there's a rig active on the well right now, and we expect that to come back in the next couple of couple of weeks. So lots of short-term things really, which don't affect long-term value but has been frustrating.
But you can see from the chart on the left-hand side here, you know, we expect H2 production, and this is in our guidance, you know, to be back up towards 60,000 . So you can see that kind of range on the guidance to close out the year. And the pro forma business really is the key point going forward on the right-hand side. As you see that, you know, over 100,000 barrels up towards well north of that for the pro forma business for 2024. So we're back to much higher production rates, and we believe these issues are behind us in terms of 1H. Quick update on a couple of projects. Slide 22 just referencing the closeout of Captain EOR.
Too continued, you know, high activity on Captain. We completed the project, and first polymer injection was achieved in May. We're recertifying the rig, and that's coming back into drilling operations now. So we are now be drilling ahead on Captain in the coming months. And in fact, this will be a multiyear campaign of platform drilling in Captain with infill in full capacity being brought on. And we're also completing the FEED of the Captain Electrification Project, which is a real live and real electrification project option. I say that in a world of options which aren't always real, Captain Electrification is very much a real project that is completing FEED. Rosebank on slide 23.
Again, quick update on that. Couple of key milestones achieved in the period. The subsea structure execution of those scopes during the summer, difficult weather West of Shetland actually this summer, but a very good program of execution on the subsea structures, kind of ahead of schedule, actually, which is great. Continued work on the FPSO. Phasing and the timing of that means that we've been able to defer some CapEx out of 2024, and continue to work hard to maintain the schedule on that project. As is always the case with major projects like this, but Equinor driving the project hard. Okay, financials. Slide 25, please. Just a bit of a summary of 1H.
Given the production, which is a little lower than we were hoping for, as I've mentioned before, given that, strong EBITDA at $533 million for the half year, and again, maintaining statutory net income at $106 million. Maintaining the leverage ratio of 0.4 x net debt to EBITDA by being able to reduce our net debt position down to $506 million. We closed with over $1 billion of liquidity. So very strong position and good EBITDA return despite production being under expectations. Actually, slide 26 shows part of how we've done that. So clearly, oil and gas price movements mean the year-on-year positions are different.
The net oil and gas price is lower, year on year, particularly gas, which was for 1H 2023, $82 a barrel, versus $57 in the market. But our strong protection position in the hedge market and the hedge book has meant that we added $98 million of EBITDA in 1H through through hedging gains. So that's $10 a barrel on to our EBITDA through hedge delivery. So this continues to underline our strategy and the value of our strategy around hedging. Continued cost management. You'll see in the operating cost position, we are down 1H 2024 versus 1H 2023. That is quite an achievement on a number of fronts.
Firstly, because actually we had shutdowns, planned shutdowns on Captain and Greater Stella Area, which last year were in the H2 of 2023. This year, they were in the H1 of 2024, so they were in June. We had more activity in 1H 2024 versus 1H 2023, but a lower cost base. So higher inflation and more activity, but lower costs. Good cost management on the OpEx side. The cost per barrel is higher, clearly, because of the production reductions, but as we look at the specifics on that, this is mostly around Alba and Erskine, because of the Lomond position on Erskine. If you take those two assets out, we're at $22 a barrel, which is kind of our long-term stabilized rate.
So good value delivery in EBITDAX, despite slightly under delivery on the production. So continuing to support our financial position, which in slide 27 we see this brought out in the summary of our debt and financial position. You know, closing the half year with $288 million of cash. So RBL at zero and then cash beyond that. You can see that takes us to a net debt EBITDAX position of 0.4 x at the end of the year, despite lower EBITDAX and over $1 billion of liquidity, as you can see from the middle chart there.
So, we leave this position strong financially at the half year, and that's before the unlevered assets come in from the Eni combination, which just adds to our material capability and optionality financially. Slide 28, summary of our hedge position. We have been, as we've done for some time now, we are thoughtful and value driven on our hedge book, and our financing arrangements allow us to do that. We hedge when we like the pricing. We hedge when we see the pricing in a place that we believe is value-adding. You'll see in the bottom right there, we've done a lot of hedging in July and August, 136 million therms. That has been driven by prices kicking up in the curve.
So our swap book on gas is now pretty full and according to the policy, and we're averaging over GBP 1.00 per therm swaps through Q1 2026. So that's a kinda long term hedge book on gas, which really locks in, you know, swaps at over 100. And then we've had significant collar positions put down with floors of 75 and 80, with ceilings up to GBP 1.40 per therm. So, we actually adjusted the policy a little bit here in application because of the cost of put options was prohibitive to us putting them down.
So we have now introduced a wide zero cost collar option in that bucket of our hedge book, which has really helped us enabled us to take very wide collars, giving a lot of upside, but really locking in the kind of base downside position in the kind of GBP 0.75-GBP 0.80 a therm range. Oil is softer at the moment, and again, we've got a decent oil hedge book position, but we expect to bring that up more fully as oil prices strengthen and continue to move in a volatile manner. Okay, I'll hand back to Yaniv to close us out.
Thanks, Iain. Thank you for this. If you please, flip to slide 30. A lot of numbers on this slide, but I think we... A couple of points to make. One is, yes, production is lower, but if you can see it, all other parameters we're doing as projected and better. So, I think that's something that's important to note. As we're looking at, as Iain said, you know, focuses on where we are economically, July 1st with the Eni combination and going forward. So significant scale, diversification of assets, and you can see the cash flows gives us a lot of material firepower.
That allows us, again, to reaffirm our dividend commitment going forward of 30% post-tax cash flows, with the ambition of up to $500 million in each of the years 2024 and 2025. So a lot of numbers, but I think the main points are there and pretty clear. Before we jump to conclusion and Q&A, I think the most important thing to show is that even with this production being lower than what we've anticipated, really minimal cash impact on our cash flow. So if we're looking at kind of the net impact of this is about $50 million, from you know, from the guidelines revision at you know, at $76 BOE.
So this kind of gives you the breakdown of where we are. Again, enables us to reaffirm our dividend target. And as we said, you know, we're looking at both protecting the dividend and distributions alongside growth and scale. Moving to slide 32, really just closing remarks. You've heard of this before, but business combination going forward, looking at looking at an October completion, new executive and leadership changes that will enable us to move to the next phase of growth post the completion. Captain enhanced recovery phase two delivered on time and on budget. Rosebank progressing materially to plan, and, you know, also subsea, material subsea work completed.
Declaring an interim dividend of $100 million is part of our commitment that we've just explained, highlighting the highly cash-generating nature of this business combination and obviously enhanced capabilities that this brings to Ithaca going forward, so with that, if there are any questions, I will be happy to take them.
Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad now. Excuse me, and if you'd like to remove yourself from that line of questioning, it is star followed by two. Our first question comes from Werner Riding of Peel Hunt. Werner, your line is now open.
Thank you. Morning, guys. I know you haven't yet completed on the Eni deal, but a simple one around future inorganic growth. And it's, do you currently see more attractive M&A opportunities in the U.K. or internationally? And when you say international, could this mean Africa, Asia Pacific, or is it more likely to be closer to home around Europe?
Iain, do you want me to take that?
Yeah, please, Zeke.
Sure. So thank you. So we're, you know, we're we're looking at international expansion. We think that this is something Ithaca should definitely look at, with this new or enhanced platform, and we have the capabilities of looking at that. I don't wanna go kind of geographic specific on where we will go or won't go. I don't think there is any any place on the map that is kind of off limits. I think the main thing for us, Iain said it earlier, is looking at value accretive assets to Ithaca, value to shareholders. I think that's what that's what's guiding us. And obviously, a place where we can do more than just a one-off type transaction, but a place that we could potentially grow in, through through more roll-up acquisition. But, yeah, yeah , I don't wanna go into specific geographies.
Okay. All right, thanks. Maybe just a quick second one then on your shareholder distribution policy, Iain, maybe perhaps. I know, yeah, and you referenced that the cash flow doesn't stop at the end of 2025 , and you have this policy of topping up your 30% of post-tax operating cash flow with specials, such that you'll pay up to $500 million out this year and next. So what does a normal dividend - a normalized dividend yield look like after 2025 ? You know, on a pro forma basis, at $500 million bucks, it's a yield of about 15%-20%. So what does it look like after that?
Yeah, so tell me the future share price, Werner, and I'll tell you the yield. But yeah, no, I mean, I understand this. We're in this w e're in this position where we have significant cash flow, significant dividend targets, and clearly, we're looking for the market to reflect our valuation properly. So yeah, I mean, I guess the yield looks odd at present, but yeah, we have our own views as to what that means in terms of the views of the market and value. But yeah, I mean, what we're aiming to do, and our long-term policy has not changed, and I guess that's the key thing in the capital allocation framework.
We're committed to a long-term dividend policy of 15%-30% post-tax cash from operations. So as we develop and grow the business and seek to develop and grow cash from operations, that will move the dividend position. We always said we'd move it within the 15%-30%, depending on circumstances. We're committed in 2024 and 2025 to 30%, and we've every intention and full intention of delivering that. As you've said, you know, we're targeting higher than that and looking to get up to $500 million. So I think the short term is clear, and the long term is 15%-30%. You know, that's our that's our framework, and that's what we'll continue to seek to deliver on.
Okay. All right, thank you.
Thank you very much. Our next question comes from Mark Wilson of Jefferies. Mark, your line is now open.
Thank you. Good morning, gents. I've got a few questions. I'd start with the first one, just specific to, you know, your largest growth project at the moment, the Rosebank project. Clearly, that project is moving forward with the subsea nine modules installed. But on the FPSO, I'd just like to ask about that and remind us what that targeted first production date is, because it did strike me as kind of strange to see that the CapEx on Rosebank was slightly reduced due to phasing of work on the FPSO, and so could you just give us an update on the timing and specific progress of that FPSO?
I ask this because FPSOs tend to be the, particularly refurbished ones, tends to be the critical point, and you say it's the critical point, timeline for that project. So just remind us on what is the expected timing for that vessel. Thank you.
Sure. Yeah, no, thanks, Mark. So, so yeah, the FPSO is in Dubai. It's being worked on. As you probably understand out there, it comes in and out of dry dock, and it's you know both the engineering, the engineering preparation, the removal, and then the, and then the installation and the execution of the upgrade scopes are all kind of linear. That will be critical path. We have no update from Equinor formally through the channels that we work in. We've got people on the project, and we've got close working with Equinor. They're still targeting the end of 2026. We've always said that could slip into 2027, and that continues, in fact, on the slides, on slide 23.
That it could, that is 2026 to 2027. No material issues that we're aware of, and it continues to be a big value project that we fully expect to be developed and to continue to be developed. It is every month. Yeah, so, so, yeah, I mean, it continues. We will update the market as we get more information, as the project evolves, as will always be the case. We expect Equinor to lead that, obviously, as the operator and 8% equity holder. But, yeah, it's progressing, and FPSO continues on the critical path, would be the headline message.
Okay, thank you. This is very good. Then a follow-up question. This is a completely different angle. It follows a little bit on what Werner asked about international expansion. Very interesting to see a new addition to your leadership. There's been a few new additions, but one in particular I noticed from the slide deck today, is a new EVP of exploration, Alessandro Barberis, who, as I understood it, until I saw this slide, was at Vår Energi over in Norway. U.K. asset base at the moment, U.K. exploration, arguably, not at front and center, one would expect, or maybe we're wrong with that. Could you speak to that appointment, if I've got this correct, and how that looks in terms of where you would be looking to explore in the future?
Yeah, I mean, I'll go that first, then Yaniv can jump in if
Okay.
to add.
Sure.
But ess-ess-essentially,
Sure
... what this does is a good example of a leadership team that's set up for all eventualities. So I think we have exploration in the UK. In fact, we drilled a well last year at K2's exploration well. We have other current licenses, and the government's been clear that current licenses will continue. We've quite a lot of license optionality. There's also other options in other exploration licenses that other people hold that we would be capable of moving into if that was what we wanted to do. So it builds optionality in the U.K., that still exists. But it also does speak to having a leadership team, which has the capability to look at any jurisdiction. As Yaniv says, the world is a big place, and there's lots of options. Yeah, having an EVP exploration is helpful in that. But yeah, Yaniv, do you want to add anything else?
Yeah, maybe just to add. Look, this is another example of really bringing in... Look, Eni is known for being a great explorer. I think this is one of the, you know, one of the enhanced capabilities that Eni brings in with, you know, with experience and know-how and knowledge. So, you know, we're happy to have Alessandro in. But as Iain said, you know, we're we're looking at organic growth in the U.K., inorganic growth, both in the U.K. and globally. And we're building the team for that.
Okay, great. And then my final point, and this is just thinking longer term, and I guess speaking to yourself, Yaniv, the deal to get done requires the 10% free float, but in terms of a longer-term outlook, and new investors, how do you view that level of free float, as the ongoing company? Do you think that needs to be better, and is there a plan for doing that?
Yeah, maybe, maybe I'll take that. Look, I don't want to speak for the shareholders here. Obviously, that's, you know, that's up to them. But I think there is an there is an understanding that the current flow needs to needs to grow. Not that I'm aware of any specific plans, but clearly, that's, you know, something that I guess the shareholders acknowledge. Except for that, I guess this is for them, you know, for them to decide what's the right timing and quantity for this.
Okay, thank you. I'll hand it over.
Thank you very much. Just as a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad, and to remove yourself from that line of questioning, it is star followed by two. Our next question comes from Sasikanth Chilukuru of M- oh, excuse me, of Morgan Stanley. Sasikanth, your line is now open.
Hi, thanks for taking my questions. I had two, please. The first one was regarding the acquisition strategy. Again, I get your comments on value accretion, but wanted to check further on what kind of resources would you be looking, would you be interested in, or of internationally, whether you would be looking at producing assets? Are you open to acquire pre-development assets? Whether is there a bias for oil, or for gas as well, if you could provide some color there. The second question was on the U.K. fiscal regime.
I was wondering if you could highlight the level of engagement you have with the new U.K. government, perhaps provide some color on the tax discussions that you're having, and the expectations that you have, and particularly, how is this impacting your view on the Cambo development and the Rosebank as well?
Maybe I'll take the first question. Thank you. So, look, you know, I don't want to be too specific, you know, on this call. And we're as you know, we're we still need to complete the transaction and get everything in place. But as we've said, you know, we're building the team for international expansion. We have the capabilities. Look, Ithaca is a, you know, cash-generating business. We're looking at producing assets with potential upside on them. Again, no part of the map is excluded, necessarily at this point. So, and mix of oil and gas, again, I think that this is, right now, with the Eni combination, we're getting close to 50/50.
I think that's something that we would like to keep going forward. We're looking at gas, as you know, the kind of transition fuel into the future. We see the value of oil, as well, especially in these very turbulent times. So, you know, overall, this is kind of the balance that we would like to keep. And we'll definitely look at, you know, adding production, and not just development assets. Hope I've answered your question.
Yeah, and on the second question, so issues around tax and the UK government, clearly, we're working with the whole sector, and we have both bilateral discussions with government and treasury officials, as well as through the regulator and through OEUK. So we have a number of inputs. In fact, there's a meeting tomorrow with the minister as part of that, and I was meeting with the industry body, OEUK, yesterday on the matter. So it's extremely active, as you'd expect. This is, you know, a change to the framework has been announced. The key thing for us is that there's an understanding by those making the decisions of what the implications are.
We have always been committed to working constructively with the UK government. We've understood the price issues around, you know, hydrocarbons and gas, particularly in the U.K., following the price spikes historically. We've tried to work constructively on the EPL position, and what we've said is that the investment allowances on the capital regime with EPL, especially the first EPL, was constructive, despite the earlier, you know, the higher rate. We'd like to see that continue, and believe it should. We think there are lots of reasons why the industry should continue to have the cap allowances that every other industry has. So that's our position, and we are advocating for that with the government. The key thing from an investor perspective is that we have optionalities.
We have a number of projects that are ready to FID in the, you know, Q4, Q1, Q2-type arena. But that will depend on fiscal regime, partly. That obviously will impact project economics. So your reference Cambo, as one among many, projects which we have built in the pipeline, which we have optionality around, and we have the capital able to be deployed. But that has to be deployed in an appropriate fiscal regime, and that's where we are looking for an outcome that is supportive of the industry. And the high-level picture is really clear. I think everyone on this call probably understands it. We need to make sure that everyone understands it, that the U.K. will need significant amounts of hydrocarbons in the next twenty-five to forty years, whatever trajectory you move on in net zero.
And the question is: Do we want to develop our own resources with tax returns, jobs, and low emissions in the U.K., or do we want to import them? That's the discussion and the point for the UK government. It's balance of trade implications, and it has jobs and real jobs across the U.K. implications on future developments, particularly. So we're working constructively. We believe we'll get to a sensible outcome, but let's see how this works through the next few months.
Great. Thank you very much.
Thank you so much. Our next question comes from Chris Wheaton of Stifel. Chris, your line is now open.
Thank you very much. Guys, good morning. Thank you very much indeed, and well done on another safe quarter, half year of operation. Two questions, if I may, please. Firstly, on the dividend and the windfall tax, you-- and secondly, on the production, not so much in the existing businesses, I think you've talked about that, but the Eni assets. Let me start with the dividend, if I may. You've made that dividend commitment 15%-30% of post-tax cash flow. You've not related it to the windfall tax, though, and it's quite clear that the windfall tax proposals are initially worse than the industry expected, and well, that is disappointing. And as you know, we fully support the efforts you're making to try and get some common sense into the windfall tax discussion.
What's the downside risk to the dividend if the windfall tax does turn out as bad as it could be? You know, and interestingly, I note that first half this year, you're paying $100 million of dividend. This time last year, you paid $130 million, yet you've overall kept your commitments. That's my first question on the dividend, please.
Sure, sure. I mean, yeah, for context, I guess the last year we had an IPO target of $400 million, which we delivered. Our target for this year is $500 million, but it's just how that's paid, I guess, is part of the issue. But yeah, in terms of tax, I mean, I better not get into too much of the fiscal weeds, Chris, or it'll just be you and me having a conversation. But in terms of our tax position, you know, we are tax efficient and fiscally...
structured in an appropriate way, which means that our exposure to tax is limited because of the loss positions associated with our entities, and that's normal, but it's a positive for our business. So it means that there's a dampening effect on the cash tax. EPL, likewise, you know, our payments are the following year from the EPL perspective. So in October this year, we'll pay the 2023 EPL cash tax. So I guess, you know, the 2024 positions announced changes that are expected to be coming in from November 1st. So that will affect the 2024 number that's paid in 2025.
You know, it won't affect it so materially, I guess, depending on the final outturn of the budget. So I think I would say from a tax cash perspective, we are managing our position, and we're engaging constructively, and the impact on changes will be in future years more than the next kind of 12-18 months or so, and therefore, our dividend framing is ambitious. That's why it's ambitious. That's why the word ambitious is there. So it's a big dividend. It's an ambitious dividend. We think it's still reasonable in the context that we're working in with the downside potential around tax.
I would say that the structure, you know, we haven't expressed the details of our policy around when we'll pay all the dividends. You know, we've always said one-third , two-third , kind of, standard dividend policy, one-third following half-year results, and then two-thirds following full-year results. But the expectations will top up with special dividends during that period as well, to reach the ambition, if we can, of the GBP 500 million that we're targeting.
Brilliant. That's very helpful. Thank you. My second question is on the production guidance. It's interesting to note, not just the. There's a slight downgrade to the implied Eni production guidance included for the second half of the year once the deal closes. If you look, that's come down by about two thousand barrels a day. I wondered if you could talk to some of the issues around that, what's driving those changes? And secondly, also, it's interesting that despite the production guidance downgrade, you haven't changed operating costs. You refer in the statement to a number of issues, for example, remediation of remedial spend on Captain, given operational issues there. Can you just help reassure me that you're not underspending, and that's why you're that's why we're seeing these production issues kicking across the portfolio?
I can reassure you that we're not underspending, no. So, yeah, I mean, to step through that a little bit, so yeah, in terms of the Eni portfolio assets coming in, so this is, I guess, a true-up of positions on a couple of things. For example, the Seagull development is a good example where the first wells are on, and the second, sorry, the third and the fourth wells were always gonna come on during the second half of 2023, and then early 2024. So there's a bit of an update on the timing on that, is part of the reason for the shift in production.
So it's purely a matter of a couple of months of timing on Seagull, which is within the normal parameters, but it does impact two-stage production, because obviously these are our new wells, kind of, higher production rates. There's also a J-Block issue with J-13, which is a significant well producer, so for us, it's a net 1,500 in our own portfolio. Eni obviously have a shared interest as well. So that well, you know, we're expecting that back on in a couple of weeks' time, but that's kind of into September. So again, from a two-stage perspective, there's impact. So those are the major ones.
There are other, kind of, minor tweaks, but nothing particularly material on that portfolio, and, you know, our outlook remains in the reserve. You can see the NSAI numbers, which we're aware of, of all those issues, that are short term, but that have then, you know, flowed into the CPR report. So I think nothing to worry about really in terms of the short or medium term really on that. In terms of costs, I mean, cost management continues to be a huge focus, but I think everyone in the business here recognizes that the CFO is tight on cost, but not on value investment, and that's what we are seeking to do.
So absolutely, I mean, money spent on Captain is good long-term money, so we are investing across that asset significantly, and the savings are around, you know, challenging costs on late life assets, particularly where costs could be reduced safely without impinging on the asset life, but operating in a different mode towards the end on assets like Alba and the Greater Stella Area.
Okay. That's great, Iain. Thanks very much indeed.
Maybe maybe just to Maybe just to note Maybe just to note
Sorry, go on, yeah.
Just one more. Yeah, just one more thing on that. I think, you know, most of our kind of Q1 were non-operated joint venture types of, you know, issues. Obviously, spending is led by operators on those assets, so I can reassure you as well, we're not underspending on our assets.
Okay, that's great. Thanks very much indeed. Good luck tomorrow with your discussion with the Energy Minister, Iain.
Thank you.
... Thank you very much. Just as a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad, and to remove yourself from that line of questioning, it's star followed by two. Our next question comes from James Carmichael of Berenberg. James, your line is now open.
Hi, morning, guys. Just I guess coming back to sort of M&A, and, you know, just, I guess, looking at some of the issues you've had in the portfolio in the first half, you know, unplanned outages on the non-op stuff and, you know, seeing the unit costs creep up. I guess. Question: lots of questions around the acquisition strategy, but is there a thought process around potentially sort of high-grading the current portfolio once the merger is complete and you've got that bigger base to work with? And then, I guess, the other side of that really is that you and most others are obviously talking about expanding internationally. Are there, you know, buyers for those sorts of assets if you were looking to offload some of the U.K. portfolio? Thanks.
Yeah, I'll take that. First, I think we believe we have a really diversified and quality portfolio in the UKCS. So, you know, our intention right now is not to dilute that position by any means. I think we've been clear on this call and in the past that we're seeing ourselves as players in the UKCS and wanna grow, as we've said, organically and inorganically. So, you know, right now, kind of diluting our position is not something we're, you know, we're we're considering. On the international M&A side, I think I've mentioned I don't want to repeat myself. I think, you know, the answer is the same answer. You know, we're we're looking at this as part of our growth strategy.
We believe that our enhanced capabilities allow us to progress that. We kind of mentioned before, we have the agility of an independent with the capabilities of a major. I think that really plays into that, and we're looking at taking advantage of all that that brings in. So yeah, that's in a nutshell our M&A strategy.
Yeah, and I'll maybe, Bill, and Yaniv, just to address a couple of specific points. In terms of unit cost per barrel, it's kind of misleading in reality, because we know Lomond has been down for so long during 1H, now fully back up. You know, the Erskine productions are over $100 a barrel. Alba's a late life asset. It could have been $80s, and kind of breaks even at current pricing. So as you take those assets out, we're at $23 a barrel for 1H, you know, even though there's been lower production, likes of Schiehallion, which is a more like $15 a barrel cost position.
So you get a kind of indication of our portfolio, and that comes to the place where actually your reference point on portfolio. The portfolio high grades itself through acquisition of production in lots of ways, and that comes on an ESG basis in terms of emissions intensity as well as cost per barrel. You know, older assets that will come to kind of COP in the next two-to-three years, which we will manage down in terms of costs, and it's not a significant decommissioning burden net to us at all in the next few years, as we kind of outlined in the CPR.
But what that does is it means that the OpEx per barrel, and it means that the intensity per barrel, reduces anyway, and our portfolio comes to, you know, long-lived assets with good cost per barrels and good intensity metrics. So it kind of organically happens, if you like, anyway, but of course M&A is an optionality to do that. It's not out of the question, but it's not the focus at the moment. We're focused on growth and development, and as I say, the portfolio kind of high grade itself in any case.
Very clear. Thank you.
Thank you. Our next question comes from Mark Wilson of Jefferies. Mark, your line is now open.
Yeah, thank you for the follow-up. It's a specific asset question. You're talking about confirming the technical feasibility of the Captain Electrification project. Could I check if that did go forward, that would be the first offshore platform in the U.K. to be run by electricity if it went forward? That's the first point. And then the second one, you say you're seeking assurances from the UK government regarding the protection of decarbonization allowance for sanctioned projects. Could you just remind us what those decarbonization allowances are? Thank you.
Sure. So as your first question, is, I believe, yes. Currently, the U.K. roadmap, Captain would be the first platform electrified. And it's a real live option, and we're working it hard. It does need the right fiscal support, and we've been clear about that. But we have spent real money on significantly progressing the project at pace, including a full FEED completion during this year. And the next stage is the route surveys. And, you know, we've worked hard on getting the electrification first electron date accelerated in different ways, and we have those options, we believe, coming together well.
So yes, it's a real project with optionality, with the right fiscal support, certainly is an option for us, and it's the kind of thing that we would like to do, but it needs to fit into the portfolio appropriately. So on your tax point, absolutely, we believe that the decarb allowance was one of the more thoughtful and sensible parts of the EPL regime, and I've got views on every part of the EPL regime, but I think I think it's was one of the more thoughtful parts of it.
It's currently, depending on how you calculate it, and the rate change, of course, of 3% up the way will change the rates, but it's currently 109% when you bake it all in, in terms of the decarb position, and 80% uplift on the EPL rate, which was 35%, and they're proposing to move to 38%. So that is significant, and we believe that maintaining a significant decarb allowance, which the government have said that they want to do. So the many statements that have been made, they have said that they want to maintain an allowance for decarbonization. The specifics of that have not been announced and are part of the discussions that we're having at present.
So we believe it's the right thing to do, and we're supportive of it, and the government clearly understands that it's valuable and have committed to having a decarbonization allowance, but scale matters. So that's the discussion at the moment.
Thank you very much.
We currently have no further questions, so I would like to hand back to Yaniv Friedman for closing remarks.
Yep. So, I think we're maybe in different locations here with myself and Yaniv, but yeah, so, let me close out here. Look, there's been a big pack. Thanks for your patience going through it. We're bringing together a prospectus and 1H results here. In summary, we're really excited, right, about the future here. The short-term kind of non-operated asset issues that we're faced during 1H is, you know, are behind us, and we're only limited anyway in impact. But really, the key thing going forward here is this is a significant opportunity business with huge optionality, both locally and overseas, and yeah, really excited about with the future what the future holds.
Thank you.
Yeah, sorry, I had a glitch here. So yeah I had a glitch here so thank you, everyone, for joining. Obviously, if there are any further questions, Catherine's always happy to answer questions. So we're, we're here, and thank you for joining.
Thank you. This concludes today's call. Thank you to everyone for joining. You may now disconnect your lines.